Fiscal deficit at 56.7% of full year target as of December 2024

3 Feb 2025 , 09:37 AM

FISCAL DEFICIT TOUCHES 56.7% IN DECEMBER 2024

With another 3 months to go, the fiscal deficit stands at 56.7% of the full year target of ₹16.13 Trillion. Prima facie, it does look like India will do better than the target. The first signal was available in the Union Budget 2025-26, wherein the fiscal deficit was lowered from 4.9% to 4.8% of GDP for FY25. In fact, the fiscal deficit target for FY26 has also been lowered to 4.4%, but more importantly, the centre has laid out a roadmap for consistently reducing the fiscal deficit over the next 6 years as per FRBM. Ahead of the budget, there were calls from the CII, urging the government to be lenient on fiscal discipline. It is to the credit of the government that they have continued to focus on fiscal discipline.

FY25 FISCAL DEFICIT STORY TILL DECEMBER 2024

The table below captures the government receipts, expenditures, and the fiscal deficit for FY25, for the 9 months up to December 2024 end. It must be noted that the minor changes made in the Union Budget are not incorporated in this table and will be reflected in the January 2025 fiscal data analysis.

Item Heads	Budget Estimate FY25 (₹ in Crore)	Actuals up to Dec 2024 (₹ in Crore)	Actuals to Target (% achieved)	Same Period Last Year
Revenue Receipts	31,29,200	22,90,710	73.2%	77.6%
Tax Revenue (Net)	25,83,499	18,43,053	71.3%	74.2%
Non-Tax Revenue	5,45,701	4,47,657	82.0%	103.5%
Non-Debt Capital Receipts	78,000	27,295	35.0%	35.3%
Recovery of Loans	28,000	18,301	65.4%	85.2%
Other Receipts	50,000	8,994	18.0%	16.5%
Total Receipts	32,07,200	23,18,005	72.3%	76.3%
Revenue Expenditure	37,09,401	25,46,757	68.7%	68.0%
of which Interest	11,62,940	8,08,313	69.5%	69.3%
Capital Expenditure	11,11,111	6,85,337	61.7%	67.3%
Total Expenditure	48,20,512	32,32,094	67.0%	67.8%
Fiscal Deficit	16,13,312	9,14,089	56.7%	55.0%
Revenue Deficit	5,80,201	2,56,047	44.1%	38.9%
Primary Deficit	4,50,372	1,05,776	23.5%	33.1%

Data Source: Controller General of Accounts (CGA)

A few quick readings up to the end of December 2024. Firstly, the year has seen the government faltering on revenues; and that is clear across revenue receipts and capital receipts. Secondly, on the expenditure front, the revenue expenditure is more than last year, but it is the capex spending that has fallen short compared to last year. That is not great news for an economy where growth is normally capital-hungry. Thirdly, there is good news on the deficit front. Fiscal deficit looks set for its lower 4.8% target, and revenue deficit remains well in control. Of course, the entire picture could change due to back-ending of expenditure in the last 3 months of FY25.

STORY OF GOVERNMENT REVENUES UPTO DECEMBER 2024

Revenues in FY25 got a big boost from the bumper RBI dividend of ₹2.11 Trillion. However, revenues have been struggling compared to last year.

• Against the total receipts target of ₹32.07 Trillion, central government has achieved ₹23.18 Trillion as of end December 2024. That is, 72.3% of full year revenue target for FY25; sharply lower than FY24 comparable period. Tax receipts have come under pressure amidst tapering growth and a spike in refunds.
• For FY25, the target for net tax revenues (net of refunds and devolvement) was cut to ₹25.83 Trillion in the July full budget. About ₹18.43 Trillion has come in as tax revenues, or 71.3% of full year target. That is lower than last year; but still a major improvement over November. Even non-tax revenues (despite RBI dividend bonanza) has only reached 82.0% of full year target, since monetization of infrastructure assets is yet to pick up.
• On non-debt capital receipts, the government set the target at ₹78,000 Crore for FY25. Among other capital receipts of ₹50,000 crore, disinvestments have again fallen short.

The government is experiencing pressure on indirect taxes; even as direct taxes are struggling to make up for the shortfall.

STORY OF GOVERNMENT SPENDING UPTO DECEMBER 2024

Here is a quick dekko at the updated numbers for FY25.

• Total expenditure, comprising of revenue expenditure and capital expenditure, had been enhanced in the full budget to ₹48.21 Trillion for FY25. As of end December 2024, the total expenditure at ₹32.32 Trillion was 67.0% of full year target; at par with last year.
• Revenue expenditure has moved faster than last year. Till the close of December 2024, actual revenue spending was ₹25.47 Trillion, against the full year target of ₹37.09 Trillion. That is 68.7% of full year target, compared to 68.0% last year.
• Capital spending is another tricky area. Despite a modest target of ₹11.11 Trillion for FY25, total capex spending stood at just ₹6.85 Trillion as of December 2024 or 61.7% of full year budget; compared to 67.3% last year.

This has a positive side too. The average monthly capex in the first 9 months of FY25 has been ₹76,149 Crore. If you add the pending capex to the FY26 target; you are looking at an average capex of ₹1,09,052 Crore per month; or a capex growth of 43.2%. That is the real good news for the India capex story.

TALE OF 3 DEFICITS: FISCAL, REVENUE AND PRIMARY

In India,  not only total receipts fall short of total expenditure; but revenue receipts also fall short of revenue spending. Hence, India runs a fiscal deficit and also a revenue deficit. Here is a quick look at the 3 critical deficits for FY25.

• Till the end of December 2024, fiscal deficit was 56.7% of full year deficit of ₹16.13 Trillion. While the fiscal deficit situation looks comfortable, the latest budget has revised fiscal deficit to 4.8% for FY25, which should now be achievable; without hitting capex.
• Revenue deficit and primary deficit as a percent of full year targets have looked impressive at 44.1% and 23.5% respectively. However, both these deficits tend to get back-loaded in the last quarter. That is something to watch out for.

The moral of the story is that unlike last few months, the fiscal deficit reduction in FY25 and FY26 is coming, despite an effective 43.2% growth in MOM capex.